Moneyball without the ball

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Portfolio Performance

See the end of the post for the current make up of my portfolio and the last four weeks of trades.

Recent Developments

I haven’t done a lot of writing since my last portfolio update four weeks ago. I have made only a couple changes to my portfolio, and added only one new position, Midway Gold, which I wrote about last week.

I remain reluctant to add positions. As I stated previously (here and here) I remain wary of the market reaction to the post-QE era. So far nobody seems to care, tapering has had no negative impact on stock prices, and we continue to march to higher highs. Nevertheless I’m not convinced. I don’t have a lot of insights into the specific mechanism by which quantitative easing leads to higher stock prices or how the end of it will cause them to go lower but I know from experience that you can’t overstate the importance of liquidity, particularly where small and micro caps are concerned. Now we’re in the process of draining a bunch of it and I just don’t think that is a great time to be too far out on the ledge. Why take the chance when you don’t have to?

I’m also not having an easy time finding stocks that I want to buy. I’ve spent the last four weeks rather diligently investigating new ideas. I’ve probably gone through 100 names. Nothing I have looked at has stood out as something I have to own.

In fact, I’ve come back to old names. In particular, I’m currently betting the farm on Pacific Ethanol. Below is a list of my top ten positions. Pacific Ethanol was a 20% position that has grown to 24% because of price appreciation.

I originally intended this post as a weekly update where, among other things, I would talk about my new position in Midway Gold and about my large increase in my Pacific Ethanol position. But my description of Midway has turned into a post of its own, so I will leave the details about Pacific Ethanol until later, and only say here that I think the stock presents a good near-term risk/reward and that my current position (20% of my portfolio) reflects my enthusiasm.

As I remarked in my last portfolio update, the only new positions that I have taken of late have been gold stocks. This has turned out to be a well timed endeavor. My first three positions, Argonaut Gold, Endeavour Mining and Rio Alto Mining, are all up 30%+ in only a little over a month.

I continued my move into the miners by adding another (soon to be) producer shortly after my last post. I took a position in Midway Gold (MDW). As I tweeted at the time:

I added another gold name today Midway Gold $MDW, heap leach deposit in development in Nevada cc: @VermeulenGold

Midway has three deposits in various stages of development in Nevada as well as other prospective lands. Midway’s 3 deposits are Pan, Gold Rock, and Spring Valley. At the current price its market capitalization is a little more than $150 million. The company has $48 million in preferred share debt and $70 million in cash. Much of its cash will be spent over the next 6 months as the company brings its Pan deposit into production. Read more

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